Rebuttal of Professor Barwise's Letter November 2014
THIS IS THE SHORT VERSION SEE BELOW FOR THE VERSION ENTWINED WITH THE LETTER Rebuttal of Professor Barwise's Letter November 2014''' ''' I have to say that for twenty five years I have subscribed because I think consumers need a trustworthy body that provides information for consumers and even campaigns against faulty or misleading products. And that body has to be not only trustworthy but ethical, and transparent. Firstly I am going to be brief as I think we should look at the underlying fundamental matters rather than a lengthy blow by blow. Governance Income Subscriptions Testing 50 calls 1. Firstly the state of the Consumers' Association. I know full well that the number of shareholders has been dropping rapidly and yet there is barely any recruitment despite many more subscribers. So why is the Council running the membership down? Either it is deliberate or it is incompetence. A small bonus discount I am sure could induce longer term subscribers to take the shareholder plunge. Was it transparent in not advising shareholders of the resignation of a newly elected Director in February, and the appointment of two co-opted members to become elected? Why are the proxy forms sent out months in advance of the Accounts? I tis apparent that many shareholders have filled them in and returned them without seeing the Accounts. In all of the recent deluge of information was there anything just on the Consumers' Association? I may have missed it but there is just a plethora of numbers. 2. Income is great but is it raised in a trustworthy and transparent manner? Income up. Well if you are going to charge £15000 per half year for full full use of the Best Buy logo and get 200 manufacturers or suppliers to bite then that is £6 million a year. And the Best Buy logo does have an effect on product sales. Which? Local ; I have been told the tradesman some years ago were charged £400 to join. I have no idea if it is true but suspect it is. So 1250 tradesman would produce £0.5 million. [ 13/11/14 I have checked with a local Which? Local tradesman and he tells me he never paid anything though he is now being targetted to pay for a Trusted Trader status survey . That scheme is £40 per month plus VAT] Does Which? receive any money for providing content for YouTube? Does it get money for steering people to retailer sites? Does it get a cut of any product sold? The US version, Consumer Reports, tells you it gets money for steering traffic. There is a concern that there is a conflict of interest between income and an independent view. 3. Subscriptions Up. I am very pleased that they are but is this because of a bigger magazine is a great product. Or is the growth driven by the Internet so that the reviews on products can be accessed whilst in the home or about the town. Which? is far far more functional than it has ever been I have been told people cancelling their magazine subscriptions have been offered the Which? Magazine at £26 a year which I think is a great price and if this reduces the normal churn of around 200,000 it would have a significant effect on subscription numbers. 4. Testing This is the fundamental rock on Which? is based. Unfortunately Which? seems to have abdicated from this area and also laid itself open to serious reputational damage. That Logiks steamer that is a Best Buy despite the nearly twenty readers who says it last barely six months has not been re-tested or downgraded. Is it a wonder we have members who prefer to use Amazon reviews? Toaster reviews that simply ignore the fact that for some toasters replacement elements are available.. The breakage or wearing out of elements is the most common fault by far for consigning toasters to the scrapheap. The testing could be better and subscribers could provide the long term testing which Which? does not do for small appliances. Which? could also benefit from testing washing machines for six months solid, as the German consumer body Stiftung Warentest does , to establish base-line reliability. If our testing is lightweight there is little point looking at Which? reviews. 5. 50 Calls I had to laugh at this. In the context of the hundreds of useful postings to Conversations, the hundred plus surveys that I have answered I think Which? gets good value from me. On the dark side obviously I rang and emailed when I was trying to establish that the LTIP was not a misprint. I had to contact them when I became a candidate. I had to contact them lots of times when they said they were going to provide as requested the Shareholder Register as a spreadsheet file and then sent a courier with 200 sheets of A3 paper. That cost me a day of phoning to find the cost for a London solicitor to look at the case. I emailed them when I worked out that there were insufficient elected Trustees and that produced a flurry. I have mailed and contacted them regarding sending these letters. All in all I cannot think it could be done on less when an organisation seems unwilling to to be transparent as to what is going on. Lastly “ Mr Taylor knows …member forum ….... .launch shortly ...”. No Mr. Taylor did not know that as when I was at the second and last meeting in June it was very obvious that whilst Which? had managed to write to all members since my January meeting no substantive work had been done on forums, format etc and everything was hedged with the Trustees will have to approve it. You may have thought that they could have told me any time since then that is being developed and an envisaged launch date. Perhaps it is a recent thing …. Regards Patrick Taylor Professor Barwise's Letter The above is my quick response BUT I have often thought that as with products there are people who really want the quick picture, and then many who like the detail. I have actually seen this used on a physical geography site and it really does cover the majority of people and is something I would like Which? to adopt. From my point of view going into the details is rather unattractive simply because the fundamental points are skirted around but lots of figures provided which are difficult for me to challenge as they are provided as totals and as you will understand from my quick answer that generating a large income is not necessarily a good sign for a charity that is meant to be independent but obtains money in various ways from commercial entities. Anyway .. Professor Barwise's Letter November 2014 Dear Ordinary Member. I apologise for writing to you at such length. However. Mr Taylors letter raises some important issues, such as executive remuneration and the composition and effectiveness of Council, that are key to Which?'s continuing success. Some of his proposals also have serious potential long-term consequences for the organisation. It is therefore appropriate that I respond in some detail to his various points. Before turning to these, however, I would like to make two broader points that provide some context to his letter. First. I would encourage you to read our Annual Review as well as Mr Taylors letter and this response. Then decide for yourself how you see the overall performance, governance and management of Which?. The facts are that, over the last ten years, our subscriptions have grown from 812.000 to 1.416.000 (+74%) and our revenues from £55.6m to £86.6m (+56%). Over the same time period, the publishing sector as a whole has grown by just 19%. Our commercial success has enabled us to increase our expenditure on policy and campaigning six-fold, from £1.7m to £10.9m. at a time when government funding of consumer representation has been reduced We've achieved this growth while keeping price rises below the rate of inflation and funding our diversification into new commercial areas to support our long-term sustainability. Secondly, we have been in touch with Mr Taylor for over a year, responding to the wide range of different issues that he has raised. As always, we have worked hard to be open and clear, investing significant time and money responding in detail to his numerous concerns and correcting many inaccuracies. Some of his points have been made repeatedly including concerns about the role of Council. That he persists in these endeavours (despite the amount of time spent by many people to answer his queries) is surprising and disappointing. In summary Mr Taylor has been in contact witn us on over 50 occasions over the last year (this includes emails, phone calls, face to face meetings and letters) raising matters as diverse as the testing of LED lights through to detailed points of procedure. [As to the numerous contacts I am disappointed that so much of what occurs in this charity has to be prised out.from it. This goes from various income streams that may or may not exist other than subscriptions through to the Trustees controlling who can be candidates whilst at the same time having co-opted Council members that they also choose] [ The LED's is a interesting one as Which? Conversations was having a very long thread on radio inteference by LED bulbs whilst simultaneously the Which? Guide to LED lights did not mention it as a potential problem at all! An example of poor control and management.? I have to admit this was at a fairly early stage where I thought it necessary to get the Trustees to realise everything was not rosy on the testing and recommendation side] '' revealing details I was responsible for pointing out that a Which? Conversation article was actually recommending an illegal action and after speaking to Which? Legal it has now disappeared. I now turn to the specific points in his letter. Voting against the accounts: Mr Taylor urges you to "use your AGM vote as a means of sending a message to Council that reforms are needed". Although an AGM vote to reject the Accounts would have no legal implications, it would certainly be disruptive and potentially damage Which?"s reputation. The Accounts are factual and accurate. A vote to reject them would make sense only if you had genuine concerns about them. [ Not to difficult to object to the Accounts as they are the only chance if you are unhappy with the bonuses and the salaries] The composition and effectiveness of '''Council: Mr Taylor criticises the decision, taken just two years ago in 2012. when our Ordinary Members voted by a large majority (91% in favour versus 7% against and 2% abstentions) to reduce the number of Council members from a maximum of 18 to a maximum of 15. in line with recommended best practice and research showing that smaller trustee boards tend to be more effective. The number of directly elected Council members was reduced from 12 to nine, while maintaining the number of co-opted members at a maximum of six. As explained at the time, we chose to maintain the number of co-opted members to ensure that, whatever the outcome of Council elections, there would always be enough Council members with the commercial and policy experience to hold the Executive to account. As part of the formal notice to the Ordinary Members, we included an explanatory note outlining the Resolution. Having received this, they overwhelmingly supported it. as already noted. The 2012 decision did. however, mean that Council was faced with a situation where retirements of elected Council members might result in a highly variable number of vacancies each year, leading to large fluctuations in the number of new versus experienced elected Council members. Council therefore used its discretion under the Articles to make interim appointments, in addition to filling three elected vacancies from the ordinary membership each year. This is a short-term, transitional arrangement to achieve a new equilibrium. From 2016 there will simply be three elected vacancies to fill each year, ensuring a consistent mix of new and experienced directly elected Council members. Barring unforeseen circumstances, there will be no more need for further interim appointments. is of course a cracker of a section. Deciding to reduce elected members could have been done by simply reducing from 4 to 3 the number elected over the three following elections. But it was not done the easy way so either it was deliberate or alternatively Council did not think it through. It would create problems meaning that Council would be appointing to Council more than normal. Given the Articles actually allowed for a replacement to complete Jo Coburn's three year term it is even more mysterious that one of the other 2013/14 candidates was not appointed [Of course there is the major assumption that Council need not discuss changes of the Articles, or even flag them up, with shareholders a year ahead so some thought could be occur to what the ramifications were.] Council nominations: This year, because there were so many nominations, the Nomination Committee recommended, and Council agreed, to reduce the number of candidates to ten. in line with changes to the Articles approved by the Ordinary Members over 20 years ago. Since 1993, the Articles have recognised that having too many candidates and candidate statements is unhelpful to the electorate and likely to reduce the number voting. They therefore contain a provision to enable Council to reduce the number of candidates to the still healthy level of three times the number of vacancies. This still gives the electorate considerable choice without presenting a plethora of candidates. This year Council decided to use this provision, selecting those with the best mix of skills and experience currently lacking on Council. The specific skills identified by Council (and communicated to the wider membership when seeking nominations and again to those applying to stand) were: strategic experience at a senior level in digital media; strategic or senior experience in the commercial sector; and high-level experience of policy development, particularly in personal finance, utilities (especially energy), healthcare or higher education. Some potential candidates did not have their nominations taken forward as their candidate statements did not demonstrate the required credentials to the same extent as those of the candidates that were taken forward. [ In my discussions last year it was put to me that Trustees were there to provide advice to various parts of Which? and help staff . And this was why they specified certain attributes. I actually fundamentally disagree with this as Trustees should be momitoring closely the overall performance particularly where you have Which? Ltd intent on growing the business. The overall total on momey spent in India is I guess around £10million pounds and achieved a membership high of around 30,000 I believe. Collectively what went on here - who is in control?] New ventures/business diversification: Mr Taylor refers to one of our new ventures. Right Choice in India, which we decided to close earlier this year. We took this difficult decision because, despite encouraging early indications, it became clear that the size of the opportunity was outweighed by the cost and risk of continuing, given our commitment to remaining advertisement free. However, we retain a portfolio of successful fledgling new businesses - including Which? Mortgage Advisors and Which? Trusted Traders as well as a growing Which? Legal business - that represent an important investment in the future success of our organisation. Diversification is risky in the short term but should reduce risk in the long term by broadening the sources of income. (Remember, only ten years ago, our publishing business was declining, potentially putting at risk the long-term survival of the whole organisation). I ask you to judge our commercial performance as a whole, including that of all the new ventures, not on the basis of one investment. Please also note that all our investments in new ventures, including Right Choice have been written down in our accounts as they have been made: the growing annual profits of our commercial business have been made after these write-downs. Executive pay: Another of Mr Taylor's concerns is the pay level of senior staff, given our charitable status. However. Which? is not a normal, fundraising charity: we do not accept public donations, government funding or any other fundraising income. All of the money we spend on charitable activities has to be earned through our commercial operations. Attracting, retaining and motivating the best commercial staff is therefore crucial to our long-term survival and success. This funding model has served us well for almost 60 years, ensuring that we remain financially viable and fiercely independent. We are. as we have always been, a not-for-profit social enterprise, working for the good of all UK consumers. Some 70% of the Chief Executive's time is spent on commercial activities and this is reflected in his remuneration. The other three executives referred to by Mr Taylor are all wholly or largely employed and funded by our commercial subsidiaries, not by the charity Our remuneration policy is discussed in Council and directly overseen by a committee of four Council members (including me as Council Chairman) and the Chairman of the Which? Ltd Board. The committee sets the remuneration of the Chief Executive and the rest of the senior team. This is benchmarked by independent consultants against relevant comparator organisations. Bonuses are paid only if the organisation achieves stretching targets. [ Executive pay ... I believe I and the majority of shareholders have been around Which? for vastly more years than the Trustees so I feel faintly insulted to be given the stock defense. The commercial side is 100% owned by the Consumer Association and should reflect the fact that it is a charity. Normally high executive pay is a reflection of a weak Board and given our CEO was employed at £120K and ten years later is on £330K - I find it very difficult to understand.] Long-term incentive plan: The long-term incentive plan (LTIP) has been put in place to motivate and retain key senior staff through what we hope will be a unique phase in the history of Which? as we aim to transform the nature and scale of our commercial activity to secure our success for future generations. We cannot achieve industry-leading growth year after year without outstanding commercial management. Any payments under this scheme will be made only if highly stretching commercial targets are achieved. They are entirely linked to commercial performance, and not to charitable activity. We have achieved impressive results by investing heavily and leading our industry rather than following the pack. We need the best staff to enable us to continue to do so. ensuring that our charitable work can continue to grow year on year. We want to be in a position in 5-6 years where we can double our expenditure on policy and campaigning (which, as noted earlier, has already increased six-fold over the last ten years) from £10.9m in 2013/14 to £20-24m. If our commercial growth stagnates, we simply won't be able to do that. are required to accept that people employed at salaries north of £170K are so inadequately motivated that offering them more money is the only way to achieve targets. Bankers bonus culture ? Members' forum: As Mr Taylor already knows, we are in the process of introducing a new member forum. It will launch shortly, once testing has been completed, and will be available to all members as part of our commitment to developing their online experience of Which?. Please join in the forum discussions once it's launched! [ Well if they had told me I might have known but it was last discussed in June where after five months from my suggested format there was nothing of any substance and certainly no definite promise that the Forum would ever see the light of day.] Proxy forms: Mr Taylor has included a proxy form with his letter. However, this is not an exact copy of the form that Council has approved for this year, which you will have received with your Notice of the AGM. Mr Taylors version is missing the unique barcodes and ID numbers that the Electoral Reform Service (ERS) uses to identify the members who submit proxy forms and check their validity ERS cannot accept the proxy form in Mr Taylor's letter because, without the barcodes and ID numbers, they cannot effectively safeguard against fraud. If you wish to submit a proxy form and want your vote to be counted, please use the one sent to you with your Notice of the AGM.If you no longer have it. you can obtain a replacement copy from ERS via customerservices@electoralreform.co.uk or by calling (020) 8889 9203. If you do submit an invalid proxy form, however, we have arranged for ERS to send you a valid form immediately, so that you can submit the approved version. [ For those of you not investors who receive Company Accounts they are meant to appear along with the proxy voting form so you can read them before voting. As has become apparent from calls to me many shareholders have either lost the form or voted ahead of the Accounts being received - roughly eight weeks between the two documents. I cannot find anyone who finds this practice normal or acceptable] Some concluding comments: Which? today is significantly larger and more complex than ten years ago. Because of economic pressures, government cuts and other changes in the consumer landscape, we are now more needed than ever. We are proud of what we have already achieved for consumers and optimistic about our ability to achieve even more in the years to come. As well as growing commercially we have greatly increased the scale, sophistication and impact of our policy and campaigning work and the free information and advice we offer all consumers through activities such as our free-to-use websites Which? University. Consumer Rights, Birth Choice and Elderly Care. We want to build on this and do even more for UK consumers, but this will be possible only if our commercial operations remain a success. We are an unusual hybrid: legally a charity wholly funded by commercial activities, and a membership organisation. We need to strike a balance between these three aspects of Which? We can do that only with the right staff and a Council that has the breadth of skills needed to run a large, complex organisation operating in an increasingly challenging commercial and policy environment. All Council members have duties, including fiduciary ones (as both trustees of the charity and directors of a company limited by guarantee) to act in the organisation's best interests. We are always open to input and constructive challenge from members and have responded at great length to Mr Taylor on the points in his letter and many others over the last year. Our overriding duty, however, is to consider the issues in the round, including the wider implications for the long-term effectiveness and sustainability of Which?. I hope this note will reassure you that we are doing this. I look forward to seeing many of you at the AGM on November 17th. In the meantime, should you have any comments or questions you can contact me via chairman@which.co.uk. Yours sincerely. Professor Patrick Barwise Chairman Its fine sounding however if we deconstruct it we know that the Testing side is losing to Amazon etc, that there are other on-line sources of advice and in some way I am afraid Which? is cherry-picking from other charities areas and intends to go further with its vasstly increasing financial muscle. The one area where it could be unique and anchor its good name is good testing and this is the area which seems to be under-resourced and poorly thought through. The Which? reputation is also open to suspicion when it becomes common knowledge that Which? is taking money from commercial companies. If it is to remain trusted it needs to be upfront with its subscription prices, and the various other income streams. It is a consumer charity not a commercial business so the expectations of it are substantially higher. ''I should add that the staff I have spoken to have been very pleasant as has been Mr. Preston the only Council Member I have had discussions with. That does not mean we necessarily see Which? from the same viewpoint as I have been a Member for decades. I also read Conversations. the Magazine, and complete the Which? surveys, and read the Reviews - probably more than the Trustees or the majority of staff. ''